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The Eleventh Circuit recently ruled that a Florida Greyhound Track employee who opposed unionization has standing to seek an injunction barring the enforcement of a neutrality agreement alleged to be in violation of NLRA Section 302. Mulhall v. UNITE HERE Local 355, 11th Cir., No. 09-12683, 9/10/10.

Section 302 of the NLRA prohibits employers from giving "things of value" to unions or their agents. The idea is to prevent employers from paying off unions or their agents in exchange for bargaining concessions. The union is supposed to represent the interests of the employees, and should not sacrifice those interests in exchange for money or other things of value. The allegedly illegal bribe in the case was the neutrality agreement itself.

In this case, a union (UNITE HERE local 355) promised an employer, Hollywood Greyhound Track which operates Mardi Gras Gaming in Hallandale Beach, to support a ballot initiative that would allow gaming. The union also agreed to refrain from striking, picketing or boycotting the employer. In exchange, the employer would give the union contact information for all employees and access on company property to the employees for purposes of organizing, and the employer also agreed to refrain from opposing the union. Once the ballot initiative passed, the company refused to keep its part of the bargain, alleging that the deal was illegal under Section 302.

The union filed a claim with an arbitrator alleging that that the employer breached the neutrality agreement. The arbitrator rejected the employer’s defense that the agreement was illegal, and ordered that the employer comply with its agreement and assist the union in obtaining exclusive representation of the employees. The district court upheld the arbitrator’s decision.

Martin Mulhall, an employee opposed the union, intervened in the case. He sought an injunction barring enforcement of the neutrality agreement. The union argued that he had no standing to assert the claim because the union had not yet been recognized by the employer as the exclusive bargaining representative. The district court agreed, and dismissed Mulhall’s claim. The Eleventh Circuit reversed.

The Eleventh Circuit held that Mulhall had a legally cognizable associational interest (i.e., association with the union) that was adversely affected by the neutrality agreement. There was a significant risk that enforcement of the neutrality agreement would result in his employer being unionized and his being forced against his will to accept the union as his exclusive representative. Finally, the court rejected the argument that the case was not ripe until the union succeeded in its effort organize the employer.

The case was filed in the Southern District of Florida by National Right to Work Legal Defense Foundation on behalf of Mulhall. NRTW provides free legal assistance to employees who oppose compulsory unionization. NRTW has been trying to make the argument -- thus far with limited success -- that neutrality agreements violate Section 302 because the employer gives something of value to the union in exchange for bargaining concessions. In other words, the union is trading the legal rights that belong to the employees (whom the union does not yet represent), to gain the status of exclusive representative. The union can then collect union dues from its members, even though the union has been disabled from fully pursuing the employees' interests by the neutrality agreement. In this case, the employer received lobbying assistance from the union. In some cases, the employer can receive a docile union; in other cases, relief from the pain of a corporate campaign is the bargain.

The decision is notable because it departed from the customary bipolar judicial orientation were courts see only two players in the labor-management equation -- the union and the employer. In Mulhall, the Court recognized a third player – the employees.

Employers that enter into neutrality agreements in order to buy labor peace should be aware that neutrality agreements may one day be seen as illegal under Section 302, and thus unenforceable. The effect is that labor peace is purchased with a bad check. However, the employer is now exposed to litigation filed by anti-union employees.